When the idea of shopping on the Internet was first introduced a few years ago and made known to people using the Internet for reasons other than shopping, it was believed to be an instant retail business bonanza. From the standpoint of commerce and retail business, the Internet makes buying and selling of goods, information and services exceedingly simple and convenient. Suddenly the whole world is at one's disposal through the so-called "browsing" software designed for the Internet. A tremendous wealth of information, just about anything one wishes to know, is suddenly at one's finger tip through a few clicks of the mouse attached to one's PC. But that is only referring to the part of buying and selling something on the Internet and the mechanism of payment involved must also be rendered simple and convenient in order to take advantage of the overall situation. Thus the payment part of the transaction must also be devised just as simple and convenient as the buy-sell part. What we are aiming at here is an overall system that will take care of both the buy-sell and the subsequent payment parts as efficiently as possible for such transactions on the Internet.
Today shoppers purchasing goods or services on the Internet are required to give their credit card numbers, phone numbers and/or addresses over the Internet in order to complete their transactions. The problem is that they do not know who else might be able to retrieve this information without their consent. People are still enthusiastic about the idea but are much more reserved in believing its potential, all because of the issues of privacy and potential credit liability not being totally resolved in shopping on the Internet at the present time. However, no sooner than these issues were first identified, a number of entrepreneurs and companies went straight to work in the hope of solving these problems with the simplest of answers.
Not necessarily introduced in chronological order, a concept called "First Virtual" first asks a potential customer to fill out an application form providing standard personal information. First Virtual would then send a personal identification number (PIN) with an 800 number over the Internet to the customer's email. Then the customer is supposed to use the 800 number to give the customer's credit card information over the phone to First Virtual to establish or open no more than just an electronic charge account. Clearly this system or procedure to shop on the Internet is no less complicated than the home shopping network and is nowhere close to a simple and anonymous cash dispensing system that one would desire.
Another concept called "Cybercash" requires customers or buyers on the Internet to first open a special Cybercash bank account that contains money designated for spending on the Internet. A consumer issues instructions to purchase goods or services on the Internet and money for these items are transferred from the consumer's Cybercash bank account to that of the merchant's. Transactions are anonymous unless the seller specifically asks for the identity of the buyer. Again one can readily see that this concept, although rather secured from the money handling standpoint, is not totally anonymous. Furthermore, it is rather complicated involving a number of interactions between the buyer, the Cybercash bank and the seller. It is definitely incompatible with the simple elegance of doing shopping on the Internet, particularly with regards to speed and ultimate privacy.
Yet another concept called the "Netbill" requires a buyer on the Internet to first put money in a Netbill account and subsequent transactions made by the buyer are to be drawn off from the account sum or balance. Accounts of both buyers and sellers are maintained on a Netbill server, to keep transactions off the Internet and to maintain lower transaction costs. After a purchase is made, the transfer of funds will automatically take place at the server. Digital goods, e.g. programs, documents etc. are transferred to the buyer in encrypted form. When the Netbill account has cleared the transaction, a receipt containing the key to the encrypted goods is sent to the merchant, then forwarded to the consumer. The advantages of this concept clearly lie in the good security of fund transfer and in accountability. However, the transaction is complicated and could be time consuming. Furthermore, it is not totally anonymous.
A two-step process called "Millicent" had also been introduced. This two-step process uses fake money much like Geoffrey Bucks at Toys `R` Us stores. A merchant creates its own electronic currency, or "scrip", that is sold to brokers. Brokers then sell the scrip to buyers. Sellers deal with just a handful of accounts, spreading transaction costs over a large volume of purchases. Millicent customers need to buy currency from only a few trusted brokers, not every vendor. Anyone can see the request for merchandise or services and the transfer of scrip over the Net as transactions take place. Clearly the principal advantage of this system is its potential efficiency and extremely low transaction costs. However, merchants can run off with the money and the system lacks privacy and auditability.
The best system to date, but by no means perfect or totally practical, is the so-called "Digicash" or "ecash". In theory this system turns a user's or buyer's hard drive on a PC into a purse. To use this system, one first establishes an account with a bank. To obtain digicash or ecash, the user creates a series of numbers that will represent a mixture of coins or money bills in various denominations according to the user's own wishes. This request for digicash is then sent to the bank, which deducts the total amount requested from the user's existing valid account. The bank then sends the user an equivalent amount of ecash as an encrypted email message containing a series of numbers. Each number corresponds to a specified amount of money.
Before the user can actually use these encrypted series of numbers from the bank to purchase goods or services on the Net, the user must first obtain a user name and a password from Digicash. Then the user has to download Digicash's ecash software to the user's PC. The final step is to create the user's own encryption key (in essence another password) and together with the user's password obtained earlier from Digicash, the user can then spend ecash on the Net.
The Digicash system has two excellent features that are essential to any such system trying to become the future standard of the electronic money/Internet payment industry. They are strong anonymity (not absolute) and cryptography. The shortcomings of this system, on the other hand, are quite plentiful. First of all, cryptography implementation for information transfer, if not very carefully thought out ahead of time, can be very expensive. Such is the case for the Digicash system.
Second, as implemented today, the Digicash system is very interaction intensive and rather loosely organized. Requests by users to the bank and the bank's handling of their requests alone could be an awesome burden to the bank when the traffic builds up in a hurry. This is especially the case when there is no amount limits of any kind imposed on any ecash request. Thus a one dollar request must be handled in the same way as one that is for $1,000.
Third, even though the anonymity for any transaction is strong, it is by no means absolute. The reason is that the encrypted ecash that is passed on to a user originates from a bank who has the account information of the individual. In order that the bank subsequently honors this particular ecash from the merchants, it needs to reconcile with its initial issuance and that leads to the original account that requested it.
Finally, a user's ecash is stored as a series of numbers on the hard disk of his PC. But storing numbers on the hard disk is risky. If one has a disk crash, which is quite common nowadays in view of the complexities of modern day software, or if one's computer is stolen, one has lost his money. It likens in this case to losing one's wallet. Because of this, users are likely to acquire encoded electronic cash only shortly before they intend to spend it and acquire only as much as they think they will really need. This particular user behavior renders the overall system highly inefficient and ultimately causes transaction overload and increased dissatisfaction and higher operating costs.
It is clear from the above discussion of systems and/or procedures for electronic money/Internet payment existing and available today that a better system is desired and badly needed. Since personal privacy and credit liability will no doubt continue to be issues of great importance for the potential Internet users, commerce on the Internet simply cannot flourish without a cash dispensing system that would not only guarantee these features but also others that take advantage of the simplicity and convenience of buying and selling on the Net.